FHA suspends “anti-flipping” rule for home sales for one year
February 1 rule to allow FHA borrowers to make offers on foreclosed properties
According to a January 16 report in the North County Times, the FHA has announced a one-year reprieve from the administrations “anti-flipping” to start in affect on February 1, 2010.
The anti-flipping rule was instituted in 2004 as an attempt to prevent FHA loans from getting caught up in speculative buying by FHA-backed borrowers. Yet at the time, FHA loans comprised a miniscule percent of the loans in the market and only prevented a few hundred FHA loans a year.
Now FHA loans represent approximately 28.1 percent of all loans in San Diego County according to real estate data firm DataQuick.
The abundance of housing demand in the current distressed housing market has been a source of much frustration, particularly for first time buyers looking to use an FHA-backed loan in order to take advantage of the first-time buyer’s $8,500 tax credit. The tax credit, which was already extended once, is widely expected to end for contracts not signed before April 30, 2010.
Until February 1, 2010, only cash and conventional loan borrowers have been able to purchase homes that had been foreclosed by investors. This left FHA borrowers with good credit yet with limited funds no ability to make offers on those homes.
The exact affect of this suspension is uncertain with continued demand for the homes by all cash buyers and conventional loan buyers who usually put down at least 20% on their purchase. FHA borrowers normally only provide 3.5% down and additional FHA “health and safety” rules can make investor asset managers wary about contracting with FHA borrowers.
However, the suspension will be welcome for buyers and the real estate community that represents them.
Time will tell if the suspension translates into more sales of foreclosed and distressed properties to FHA borrowers during February, March, and April when the first time buyer credit ends.
For more info: Brian Flock may be reached at brian@flockdreamhomes.com, (619) 793-5224, or www.FlockDreamHomes.com. NEW! Get a FREE home search phone app for GPS enabled smart phones by texting FLOCK to 87778 or by visiting http://www.SanDiegoSmarterAgent.com